Isolated and Under-Exposed: Why the Rich Don't Give

In terms of charity, the rich in America give a lot. But they're not giving the most. According to a new study out from The Chronicle of Philanthropy, which analyzes charitable giving at the ZIP code level, the richest neighborhoods are donating much smaller shares of their discretionary income than lower-income neighborhoods. Only nine of the 1,000 biggest-giving ZIP codes are among the richest 1,000 ZIP codes.

Rich people are certainly giving a lot. Those with annual incomes of $200,000 or more represent 11 percent of the tax returns but account for 41 percent of the money donated, according to the report. But as a share of their income, the richest people in the U.S. are giving at a significantly lower rate than the less affluent.

The study looked at tax returns for people with reported earnings of $50,000 or more from the year 2008 – the most recent year for which data was available. The report found that for people earning between $50,000 and $75,000, an average of 7.6 percent of discretionary income was donated to charity. For those earning $200,000 or more, just 4.2 percent of discretionary income was donated.

Turns out lower giving among the rich likely has much more to do with where they live and who they live near.

As this accompanying article from the journal notes, when the rich are highly concentrated in wealthy enclaves, they're less likely to give as compared with the rich living in more economically diverse neighborhoods. The report found that in neighborhoods where more than 40 percent of taxpayers reported earning $200,000 or more, the average giving was just 2.8 percent of discretionary income.

In other words, concentration of wealth is also isolation from the less fortunate.

Paul Piff, a postdoctoral scholar in psychology at the University of California at Berkeley, says he has conducted studies showing that as wealth increases, people become more insulated, less likely to engage with others, and less sensitive to the suffering of others.

There's also an element of geography. The researchers found that in 1,906 ZIP codes where at least 10 taxpayers earned $200,000 or more and at least one household itemized its returns, none of the wealthy residents reported any charitable giving. Of these, 79 percent of the ZIP codes are located outside of major metropolitan areas – areas of far lower populations and densities that would also result in isolation from the problems of the less fortunate. And while philanthropy is not only focused on poverty and poor people, it does tend to have a focus on community betterment in all its various forms. Those farther out from metropolitan areas may be less focused on or concerned with such community development.

It's not too shocking that some people give less than others, even among the rich. But it's interesting to see how neighborhood location and composition can limit the power of the wealthy to give.